Start-ups key to revving city's economic engine

Photo credit: Urbanite

PlaceVine co-founder Adam Erlebacher said, “It’s a lot less expensive to start a Web-based business today than it was just a few years ago.” (RJ Mickelson/amNY)

By Garett Sloane

Finance, fashion and insurance have powered New York’s economy for decades. But now that these old reliables are in a tailspin, the future of the city’s economy may well rest in the hands of laid-off workers who are trying their hand as entrepreneurs.

Interest in starting new companies seems to be swelling with the ranks of the unemployed, experts said, and the city is capitalizing on a unique chance to remake its economy and create a start-up culture that other areas, such as Silicon Valley, have long dominated.

“You have a whole pool of people who are potential entrepreneurs and that’s a great thing to see,” said Owen Davis, managing director of NYC Seed, which feeds companies with start-up money up to $200,000. “It’s not a great thing to see that people are losing their jobs. On the other hand it’s a great thing to see that entrepreneurial activity is one of the release valves for people.”The city has made entrepreneurship a focal point of its economic recovery plan by teaching laid-off Wall Streeters to launch start-ups, establishing business incubators, and encouraging the flow of venture capital.

Up from the underground

The city consistently comes in third or fourth in venture capital behind hubs such as Silicon Valley, San Diego and Boston. The difference between New York and those tech centers is that the community is not as organized here, and the ecosystem has not been fully cultivated, many in the community said.

“There’s a lot more going on here, and I think that has overshadowed the start-up scene, and I think now that there’s sort of been a fall-out in [other] industries we’re going to see more entrepreneurism,” said Jeevan Padyar, principal at the Connectors Group, a consulting firm that helps start-ups.

In Silicon Valley, all the entrepreneurs seem to know the circuit — from which restaurants to frequent to where the meet-ups are, according to Douglas Locke, director of Solidea, another consulting firm for start-ups.

“There is a ton of activity. There’s a whole underground that in New York most people don’t know exists,” Locke said. “There are meet-ups and networking groups. … It’s just that there’s no organizing source on where people should go and who they should talk to.”

Solidea and The Connectors Group have joined to offer a solution. At the end of April the firms will host Entrepreneur Week with the goal of joining the city’s disparate business groups. Locke said he expects hundreds to attend.

Taking root

NYC Seed started investing in companies just last month. One of the companies, PlaceVine, is in the growing field of digital advertising, a sector many have identified as New York’s sweet spot.

PlaceVine founders, Adam Erlebacher and Greg Neichin, are still just starting out. Their headquarters is an apartment in Chelsea, but that’s just part of the lean mantra many start-ups subscribe to.

“It’s a lot less expensive to start a Web-based business today than it was just a few years ago. So the amount of capital that you need to get started is far lower,” Erlebacher said.

The cheapness factor is fostering many Web entrepreneurs.

“The cost of start-ups is essentially driving down to zero because there’s essentially open-source software, and no longer do you have to buy a Sun server and bring it into your apartment for thousands of dollars. Everything is hosted in the cloud,” said Dave Ambrose, co-founder of Salescoop, a Union Square-based start-up that uses the Web to unite consumers who bargain for better deals when buying products en masse.

Not only are some Internet Technology costs cheap or free, Ambrose and his partner use free office space at a friend’s company where layoffs opened room for them.

Room to grow

Other companies have identified lower office leasing rates as a potential benefit from the downturn.

Brothers Josh and Dinesh Boaz founded Direct Agents, an online-marketing company. In their six years of business they have grown from a space at a shared office complex to a SoHo office with about 35 employees and still hiring. They need more space.

“One of the reasons we’re making that push now, to expand into a new office is that there are opportunities we see with the down market, and real estate is one of them,” Josh Boaz said.

Another opportunity, Boaz and other entrepreneurs identified: human talent.

“Whenever we put a job posting up we’re seeing people who maybe one or two years ago wouldn’t have considered marketing,” Boaz said.

Now, there’s a flood of highly qualified workers.

+UNITE

Meet-ups and events for entrepreneurs in the city:

Below Houston:

April 9 at 7 p.m.; Bread, 20 Spring St.

The founder of AppsSavvy, Chris Cunningham, organized this meet-up for SoHo companies.

Spring Meetup @ Shake Shack:

Friday at 6 p.m.; Shake Shack, Madison Square Park.

Entrepreneurs congregate at the famed burger joint.

Entrepreneur Week: NYC ENT ’09:

April 20-24; visit nycentweek.com

Network with budding entrepreneurs, mentors and investors.

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